Scaled-Back Health Reform: Is It Possible, Would It Work?

Should Democrats try again with a scaled-back health reform bill? Could a scaled-back bill work, and would it be meaningful health care reform?

Answers were given via phone and e-mail, and have been edited for space and clarity.

Richard Kirsch

National Campaign Manager, Health Care for America Now

Democrats should pick themselves up, dust themselves off and enact the compromise plan that they were set to pass before Tuesday’s election. They still have big majorities in both houses. Because of Republican obstructionism they’ll need to use different procedures to get the job done, but there’s every reason to go ahead and finish the job of guaranteeing good, affordable coverage.

The idea of scaled-back reform is a fantasy. The public wants to stop insurance companies from denying coverage for pre-existing conditions. You can’t do that without a mandate; you can’t do a mandate without subsidizing coverage; you can’t subsidize coverage without Medicare savings and new revenues. The public wants to end medical bankruptcies; but to do that you need to provide affordable coverage to people and you need to require decent insurance benefits and put a ban on annual and lifetime caps. Doing all that requires setting up exchanges and subsidizing coverage.

I could go on and on, but the fact is that the elements of reform that have always been and still are very popular can’t happen in scaled-back reforms. The elements of reform that are needed to put the country’s health care system in a new direction require a comprehensive framework, like that included in the bills passed by both houses.

This isn’t really a policy question; it’s a political one. Republicans are counting on stopping the Democratic agenda so that Democrats will fail and voters will give the Republicans another chance. What the Massachusetts election demonstrated is that Democrats need to deliver on the promise of change. After a year of getting near the finish line on comprehensive health care reform, the only choice from a policy and political perspective is to get the job done.

Democrats certainly should hit the “reset” button and come back with a scaled-back health reform. That can be successful and very meaningful if they understand the deeper reasons why health reform is in a predicament.

Two profound lessons should shape a re-run at reform. First, the U.S. health care economy is bigger than the entire economy of France. It was conceptually impossible to restructure it in one horse-traded bill and do it right. Americans know that and so resist sweeping change. Thus Congress needs to build a new system one stage at a time, testing each and getting it right before doing the next. Second, rather than Democrats going alone once again, they must genuinely reach across the aisle and incorporate major pieces of the Republican agenda. Americans are only likely to accept major change in their health care if there is broad bipartisan support in Congress.

What should a bipartisan scaled-back approach look like? It must have two central elements. First, give states much wider discretion to try innovative coverage expansions while figuring out the best ways to redesign insurance. Congress should agree to federal-state contracts, involving negotiated five or ten-year redesigns or exemptions from federal programs, provided there is an agreed path to wider coverage within a pared-back federal budget for reform. Some states might well opt to try out features favored by Senate Democrats (such as state exchanges), or the House leadership (such as Medicaid expansion). But others would prefer Republican approaches built more on private markets. Diversity is far more likely to lead to progress right now than another Democratic attempt, albeit scaled back, to push Oklahoma and Massachusetts down the same path.

Second, Democrats should resurrect the long-standing bipartisan vision for reforming the tax treatment of employer-sponsored health insurance. The aim should be to make tax relief more equitable, to discourage overspending by those with generous plans, and to provide financial help for those without adequate coverage. Tax reform would also make it easier for states to experiment with non employment-based ways of organizing plans, such as through farm bureaus or groups of churches. Democratic leaders can work with senior Republicans on how best to restructure tax relief. Today the major unions will prevent any meaningful reform in a Democrat-only bill.

So in the current climate only a scaled-back approach is feasible. But Democrats must recognize they need to take a modified approach and not just a leaner one.

Karen Pollitz

Research Professor, Georgetown University Health Policy Institute

Policymakers, federal and state, have pursued an incremental health reform agenda for decades and, with a few exceptions, that has turned out to be codespeak for not doing anything meaningful at all.

For health reform to work — that is, to result in more people actually enrolled in coverage that actually connects them to care they need — three tests must be satisfied. Call them the three As. Health coverage must be available, affordable, and adequate.

Availability has to do with eligibility. Reform must increase the number of people who are eligible to sign up for coverage — today, people are ineligible because they’re sick (i.e., denied due to preexisting condition) or because they aren’t eligible for benefits at work, or because they’re childless adults who don’t qualify for Medicaid, or too young for Medicare.

Affordability has to do with the premium cost. The uninsured have modest incomes and simply cannot afford insurance premiums without subsidies — and not just discounts, but comprehensive subsidies that bring the cost of coverage in line with what struggling families can actually afford.

Adequacy has to do with what insurance covers and what kinds of deductible and other cost sharing apply. Research demonstrates that when underinsured people get sick but still face thousands of dollars in out-of-pocket expenses, they forego or delay care just like the uninsured.

So far, our history of incremental reform has been to help people with one or two of the three As, but not all of them. That doesn’t work. For example, in 1996, HIPAA promised certain people access to individual health insurance. They would be guaranteed eligibility and couldn’t be turned down because of preexisting conditions. But HIPAA offered no subsidies and it didn’t limit what insurers can charge for these policies. So, not surprisingly, almost nobody could afford the coverage that was available.

In the 1980s, Congress promised laid-off workers continued availability of group health plan coverage through COBRA. But until just a few months ago, Congress didn’t provide for COBRA subsidies. As a result, for decades 80 percent of people who were eligible for COBRA didn’t sign up. Private insurance companies also stint on the three As. Sure, carriers today offer lots of cheap policies — but these policies typically don’t cover much (no prescription drugs, maternity care, mental health care, etc.) and people with preexisting conditions need not apply.

What’s the appeal of these incremental reforms? They don’t cost money. Politicians can claim credit for acting without raising taxes. But in the end, the number of uninsured climbs, as does medical debt, uncompensated care, and worse.

Incremental reform that gives people just some of the help they need is like offering a 10-foot rope to somebody in a 30-foot hole.

If incremental reform really is what’s on the horizon (though we can and should do more), Congress could pick a segment of the population and provide all the help people need. For the selected population, guarantee coverage that is available, affordable and adequate. For example, we could focus first on the sickest uninsured — cancer patients, people with heart disease or diabetes, etc. We could create a national risk pool that provides comprehensive coverage with modest, income-related premiums and with no pre-existing exclusions. Or we could incrementally expand coverage based on age. Universal coverage for kids? We could expand Medicaid and CHIP to cover all children. Young adults? We could expand our children’s health programs to offer lifelong coverage, and stop disenrolling beneficiaries as they turn 19. Or we could start at other end of age spectrum and lower the Medicare eligibility age by one year until all who need this coverage have it.

Wherever we start, we must guarantee the three As for the target population, recognizing that won’t be cheap. And there must be a plan to gradually expand the target population until some day, finally, we reach universal coverage.

Uwe Reinhardt

Professor of Economics and Public Affairs, Princeton University

I think they should not [aim to pass a scaled-back bill]. This is in part a political issue, but it’s also a technical issue. If they scaled it back, god knows what kind of ugly duckling would ultimately survive — it would be something with one foot and one wing.

The bill we had was at least coherent, although it was damaged and dented in the legislative process. It was a dented car, but it drove. [A scaled-back bill] might end up being a car that has only three wheels and lacks the spark plugs. Because, for example, you could say we will help people only up to 200 percent of the poverty level, then we won’t have to spend so much money. But what about somebody who makes three times poverty, which is about $60,000, but health care costs $25,000? He can’t afford that.

Or what if you say we’ll have community rating for insurance companies, but we won’t have an individual mandate, because the Republicans hate a mandate? Well, that would destroy the insurance industry.

So I don’t think [Democrats] should do that just so they can say “we did some health reform,” — I don’t they should try to fool the American people like that.

What they should do instead is address the American people — and President Obama has a chance to do that next week, in the State of the Union address — and say “we had some ideas coming into this, we Democrats. You cannot fault us for not having worked many hours on this. If the Republicans say we didn’t listen to them, that’s not totally fair. We had a public plan, they were opposed to it (along with some Democrats) — and it’s out. We listened to the Republicans, and we trimmed a lot out already. You got upset about death panels, we took out the end-of-life counseling.”

Now the president could say, “this is the work, the oeuvre we produced, and apparently it’s not good enough, voters think that it’s not what they want. So here is my challenge to you, Republicans: Within three months, come up with a bill, put it out there. But the bill has to meet some performance standards. It should cover a meaningful number of uninsured, like the 30 million that the CBO said we would have covered. It should bend the cost curve […] Tell us how you would bend the cost curve, what would you do? Somebody making $60,000, with cancer, who’s self-employed, what would you do for them?”

Maybe this might even lead to something. Senator Coburn has a plan that’s 80 percent done. Coburn would do what Senator McCain proposed and tax all employer-provided benefits. Of course, he would send it back in the form of tax credits — but try to get past the U.S. Chamber of Commerce.

President Obama should come out slugging. Of course he will not do that. Why? Because somebody might be upset. Instead we’ll get a nice speech. So that’s the problem.

Gail Wilensky

Senior Fellow, Project HOPE Foundation; Former Director of Medicare and Medicaid during the George H.W. Bush administration

Yes, I think the Democrats should try a scaled-back bill. It will be a challenge to devise something that is acceptable to the Democrats, particularly in the House, and also enough Republicans to get it through the Senate. But it’s worth a try, because the issues are really serious.

There are issues that are easier dealt with if you do the big bang of health care reform, and are more complicated if you do health care reform on an incremental basis. But the country is much more likely to do incremental reform than the big bang. If it had been possible for the Democrats to have taken on health care first, it might have been possible to do it. But of course the reason they won the sweeping electoral victories they did was the economic meltdown, and that required their first focus.

So almost by definition, the issue that got the President and Congress to be so heavily Democratic, precluded taking on health care reform first. And that may well be an issue in the future. It was an issue for President Clinton in 1993 — he had to take on budget issues first, and only then go to health. And while the Obama administration was trying hard not to repeat mistakes of Clinton administration, some of same dynamics got in their way.

So having said that, I think it’s important to try to make inroads in reducing the number of uninsured, and in taking on some of the insurance reforms. Some of that already happened through HIPAA in 1996, but it’s still a problem, particularly for people in the individual market.

Tort reform is a serious issue too, for Republicans but also for physicians and hospitals and other providers, and it would be very useful to do something more serious than what was being considered before.

There was very little in the way of cost containment or health care delivery reform [in the House and Senate bills], other than some interesting or intriguing pilot programs. And there’s no reason not to keep those.

So I know it will be very disappointing to Democrats who are looking for the ‘big bang’ of health reform. But the challenges remain, and we don’t have the history of the big bang in health care reform working.

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